Demand and Supply: An Intro chp 2

Flashcards covering key concepts from the microeconomics lecture on demand and supply.

What is the definition of demand?

The quantities that consumers are willing and able to buy per period of time at various prices.

What is a demand schedule?

A table showing the various quantities demanded per period of time at different prices.

What is the law of demand?

As the price increases, the quantity demanded decreases.

What is the income effect?

The effect of a price change on real income, and therefore on quantity demanded.

What is the substitution effect?

The substitution of one product for another as a result of a change in their relative prices.

What is market demand?

The total demand for a product or service by all consumers.

What is supply?

The quantities that producers are willing and able to supply per period of time at various prices.

What is a supply schedule?

A table showing the various quantities supplied per period of time at different prices.

What motivates suppliers to supply more of a product?

Higher prices mean more profit, motivating suppliers to produce more.

What is market equilibrium?

Occurs where quantity demanded equals quantity supplied, resulting in neither a shortage nor a surplus.

What is a surplus?

The amount by which quantity supplied is greater than quantity demanded, occurring at prices above equilibrium.

What happens during a shortage?

At prices lower than equilibrium, quantity supplied is less than quantity demanded.

What are the determinants of demand?

Factors that cause a change in demand, including consumer preferences, incomes, prices of related products, and expectations.

What factors affect supply?

Prices of productive resources, government taxes and subsidies, technology, prices of substitutes in production, and number of suppliers.

How does an increase in demand affect the equilibrium price?

It typically raises the equilibrium price.

How does a decrease in supply affect the market?

It creates a shortage, leading to an increase in price.

What is a demand curve?

A graphic representation of a demand schedule.

What is a supply curve?

A graphic representation of a supply schedule.

What does 'ceteris paribus' mean in economics?

Assuming all other factors are held constant.

How do changes in consumer preferences affect demand?

If tastes change, demand will increase or decrease based on the new preferences.

What occurs when the price of a substitute product increases?

The demand for the related product increases.